2. Agenda Today: Legal Form of Business Tuesday: Legal Considerations Wednesday: Developing a Business Name (and Legal Search) Thursday: Guest Speaker—Herzing Friday: Section 5: Legal Considerations (lab)

3. Types of Business Ownership Sole Proprietorships Partnerships Corporations

4. What is a sole proprietorship? Owner is responsible for business activities Makes up 76% of all businesses Only one responsible for liability

5. Advantages Easy & inexpensiveEasy & inexpensive Complete authorityComplete authority Least regulated form of ownershipLeast regulated form of ownership Business pays no taxes; not separate from ownerBusiness pays no taxes; not separate from owner Tax rate is lowerTax rate is lower

6. Disadvantages Unlimited liabilityUnlimited liability Difficult to raise capitalDifficult to raise capital Limited on skills & abilitiesLimited on skills & abilities Death dissolves businessDeath dissolves business

7. Things you will need DBA: Doing business as needs to be applied for EIN: Employer Identification Number if employees are going to be hired Strive to be successful!

8. What is a partnership? More than one person shares the business decisions and outcomes Partners decide together the outcome of the business

9. Types of Partnerships General Limited Joint venture Strategic Alliance

10. Advantages Inexpensive to create General partners have complete control Share ideas Secure investment capital –more easily –in greater amounts

11. Disadvantages Difficult to dissolve one partner’s interest in the business without dissolving the partnership Personality conflicts Bound by laws of agency –held liable for each other’s actions –can be sued for breach of contract

12. How can we be successful as a partnership? Share business responsibilities Put things in writing Always be honest with each other Consider partner’s needs before committing to the partnership Establish a partnership agreement

13. What is a corporation? chartered or registered by the state legally operates apart from its owner or owners lives on after owners have sold their interest or passed on

14. Types of Corporations C-corporation Most common form Protect from being sued for actions & debts File a Certificate of Incorporation Appoint a board of directors Limited to 30-50 stockholders in most states

15. Advantages Raise capital by issuing shares of stock –Common Stock –Preferred Stock Limited Liability Create pension & retirement funds Offer profit sharing plans to their employees

16. Disadvantages Pose financial problems Expensive to set up Cost between $500 to $2,500 in fees Income is heavily taxed Pay taxes on profits Pay stockholders earnings or dividends Stockholders pay income taxes on their dividends

17. Types of Corporations Subchapter S corporation Taxed like a sole proprietorship or partnership; no double taxation Profits are passed through the corporation and taxed only once Usually cash businesses Shareholders must be U.S. citizens or residents

18. Types of Corporations Nonprofit Corporation Legal entities that make money for reasons other than the owners’ profit Profit must remain within the company Four categories Charity, public benefit, religion & mutual benefit

19. Types of Corporations Limited Liability (LLC) Members not liable for company debt Pass-through tax advantages of partnerships Shareholders are only taxed once Law firms & medical firms Popular with foreign investors & family owners